FIN 5503 Identify if the following actions constitute hedging (explain in detail why an action is hedging or why not): An employee of Microsoft owns employee stock options in the company but his options are yet not vested. To avoid losses the employee short sells appropriate number of shares in the market. Worried about the decline in the prices of MSFT shares an individual buys a put options on the stock with one year to maturity. A bakery takes a short position on the price of wheat, the main raw material of their business. A farmer contributes $2000 to a pool of funds that is used to reimburse the difference between the selling price of the crop and the cost of seed, in case the selling price of crop falls drastically due to oversupply.
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